Media must understand that money that isn’t accounted for isn’t always looted

Saturday July 25 2015

In Summary

Unfortunately, there is real theft happening at the counties, but mixing poor forecasting, budget indiscipline and poor accounting together with “plunder” is misleading.

By Jason Lakin

An unfortunate trend has developed in Kenya with respect to oversight reports produced by institutions like the Controller of Budget and the Auditor General.

Rather than make these reports publicly available along with a press release, these institutions tend to release bits and pieces to the press weeks, and sometimes months, before the actual reports are available on their website or anywhere else.

The delays in release of the full reports has the effect of encouraging the public (which needs little encouragement) to lose interest in them after a one- or two-day media blitz.

This is because there is never a timely response to the media stories from independent analysts reviewing the reports to see whether or not the media have got the story right, or ignored key issues. By the time analysts have a chance to review the reports, everyone has moved on.

The latest example of this trend is a set of stories about county audit reports. These stories refer to the Auditor General’s 2013/14 audit reports, which are not yet available to the public as I write.

Not only does this lead to low-quality reporting, it also raises suspicions about selective targeting of counties, since the media inevitably only cover the more salacious tales.

How are these reports reported on? First, consider a headline in Sunday Nation of July 19. The front page refers to “massive looting.” Inside the cover, we are told there is “theft and plunder.” The tendency to reduce all financial management problems to outright theft is misleading and ultimately confuses the public about what needs to be done to set things right.

If we look at the front page, there is a small inset with some figures. By far the biggest of these refers to Ksh252 million that was collected by Nairobi but not banked. This is a violation of the PFM Act, because revenues must generally be collected and deposited in the County Revenue Fund so that the Controller can authorise their release before they are actually spent. This is part of the system of control that was brought into effect by the Constitution.

I note, however, that the PFM Act in section 109(2)b did allow institutions such as health facilities to retain funds collected at the facility for their operational costs.

We can only assume from the media report that the Auditor is raising this query because the unbanked funds were not of the type covered by the exception mentioned above.

Having said that, it does not follow that such money was “stolen” or “lost” as the article implies. It may well have been spent on county services for which documentation is available. That it was improperly done would not be in doubt, but this is a systems failure and not necessarily theft.

It is also worth noting that the unbanked funds amounted to just under 5 per cent of the reported revenues for Nairobi county. That is not a trivial amount, but considering that this is the biggest item mentioned and that this money was not necessarily “lost,” the title of the article would appear to be misleading.

A related story on road maintenance in Murang’a county suggests that the county spent 165 per cent of the budget for road maintenance. If the county went over budget because prices were inflated and money was stolen, that would be of concern for the reasons this set of articles implies.

But the article is vague about this. If the county overran its budget but did actually spend the money on road repairs, this is a problem of poor forecasting and failure to adhere to the budget, but not of pilfered funds.

A similar situation arises around “pending bills.” Pending bills allow ministries to bust their budgets by failing to pay for all of the costs they incur in a given year. While this is bad practice, it also does not mean money was stolen.

Finally, the coverage of poor revenue performance is equally misleading. Many analysts have been saying that county revenue targets were too ambitious since 2013. We are now being told that they were not too ambitious, but that counties are simply stealing the revenues before accounting for them.

This could be true, but the media stories (Daily Nation, July 20) provide no evidence. They use innuendo instead, suggesting that there can be no other explanation for the fact that county revenues in 2013/14 have “fallen” by 40 per cent, presumably against local authority revenues in 2012/13. Yet this seems unlikely: Controller of Budget data show that 2013/14 local revenue was Ksh26.3 billion, up from Ksh24.5 billion in 2012/13.

Unfortunately, there is real theft happening at the counties, but mixing poor forecasting, budget indiscipline and poor accounting together with “plunder” is misleading.

Jason Lakin is the Kenya country director for the International Budget Partnership. E-mail: [email protected]